As return to markets beckons, Kenny wants EU to focus on growth

By Carmel Crimmins and Lorraine Turner

Friday, January 13, 2012

TAOISEACH Enda Kenny has challenged Europe to shift its focus from budget cutbacks to growth as he said he hoped to return to bond markets next year at the levels charged on the eve of its EU/IMF bailout.

European leaders’ agreement last month to seek tighter budget controls was not sufficient on its own to solve the eurozone debt crisis, Mr Kenny told a Reuters event in London, saying funding certainty must be provided.

As Spain and Italy were securing sharply lower borrowing costs at debt auctions yesterday, Mr Kenny said Ireland hoped to make a "tentative return" to bond markets next year at about 6%.

"Clearly we are not yet at a point where market confidence in the euro has been restored. We must ensure that more binding, durable and enforceable fiscal rules go hand-in-hand with funding certainty for countries pursuing sound and sustainable economic policies," said Mr Kenny.

"Beyond that, we absolutely must start creating the conditions and environment for a return to economic growth and job creation across the [European] Union."

The 6% figure Mr Kenny noted yesterday compared to a current yield of 8% on Ireland’s benchmark 10-year bond.

"The situation would improve because of the confidence people would have in the country," said Mr Kenny, referring to a return to funding at 6% — what Ireland paid to issue €1 billion of eight-year debt the last time the country tapped debt markets in September 2010.

With an €11.9bn bond due to mature in January 2014, the Government may need to raise up to €15bn before the end of 2013. Economists warn that borrowing at 6% in the medium term would be unsustainable as inflation and growth rates are likely to be much lower than that.

Spain paid 3.8% for four-year money yesterday, while Greek 10-year yields stand at 34%.

The Government is in technical discussions with European officials to try to refinance the €47bn cost of shoring up Anglo Irish Bank, and Mr Kenny said he was following up on a number of initiatives on how the eurozone’s rescue fund could help Irish banks.

Cutting the burden of Ireland’s debt would also help smooth the passage of a possible referendum this year on Europe’s fiscal compact.

Mr Kenny reiterated that the Government would only be able to make a decision on whether a vote was necessary when the text of the proposed compact was finalised.

This appeared in the printed version of the Irish Examiner Friday, January 13, 2012